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Liberty Travel, Inc. v. Friedman & Siegelbaum

July 14, 2010


On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-4236-00.

Per curiam.


Argued October 27, 2009

Before Judges Fuentes, Gilroy and Simonelli.

This appeal concerns a legal malpractice, breach of contract, and misrepresentation action filed by Liberty Travel, Inc. and Barry S. Kaplan, Liberty's former chief operating officer (Liberty), against defendants Friedman & Siegelbaum, and attorneys Steven D. Fleissig and Philip Stern, individually, (the Friedman firm), as well as Liberty's Pennsylvania counsel, Richard, DiSanti, Gallagher, Schoenfeld & Surkin (the Richard firm). Liberty also asserted intentional, reckless, and negligent misrepresentation claims against Sereni & Lunardi (the Sereni firm); partner Mark A. Sereni; Denise Mazza, a paralegal in Sereni's office; and Paul Gordon Hughes, Michael P. Pierce, and Henry Lunardi, general partners in the Sereni firm. Liberty's misrepresentation claim is based upon alleged false statements made by Mazza to Fleissig in connection with an alleged agreement to extend the time Liberty had to answer a class action complaint filed against Liberty by a former employee in Pennsylvania. Liberty's New Jersey legal malpractice action arises from this class action suit.

On June 20, 1995, Nancy Signora, a former Liberty employee, filed a complaint in Pennsylvania against Liberty, asserting a common law claim for retaliatory termination based upon her attempt to exercise her rights under the Pennsylvania Minimum Wage Act (PMWA), in addition to an individual and class action claim for failure to pay overtime wages under the PMWA. On July 28, 1995, a Pennsylvania court entered default judgment against Liberty for failure to file a responsive pleading. Liberty's efforts to vacate the default judgment proved unsuccessful. In a trial limited solely to damages, conducted in July of 2003, a jury in Pennsylvania awarded the Signora class $1,406,117.58 against Liberty.

In this malpractice action, Liberty claims that the Friedman and Richard firms failed to obtain an extension of time to answer Signora's Pennsylvania complaint and that the Richard firm did not take appropriate legal action to vacate the default judgment entered against Liberty. Liberty raises the same facts to support its claim based on breach of contract. The Friedman firm settled with Liberty after this appeal was filed. Thus, Liberty's only remaining claims are against the Richard firm, based on its failure to vacate the default judgment entered against Liberty, and against the Sereni defendants, for breach of contract.

The trial court dismissed Liberty's claims against the Richard and the Sereni defendants. With respect to Liberty's claims against the Sereni defendants, the trial court found that the issue of the existence of an extension agreement that would have prevented Sereni from entering a Pennsylvania default judgment against Liberty had been tried to conclusion in favor of Sereni by a Pennsylvania court. The trial court reasoned that the doctrine of res judicata thus precluded Liberty from relitigating this issue in the context of this New Jersey breach of contract action.

The trial court came to a different conclusion with respect to Liberty's claims against the Richard firm. After conducting its own de novo review of the Pennsylvania court's decision, the trial court concluded that the Pennsylvania judge misapplied Pennsylvania law when he denied the Richard firm's motion to vacate the default judgment against Liberty. The trial court thus granted summary judgment in favor of the Richard firm. Although this ruling was sufficient to constitute a final judgment, the trial court nevertheless found that even if the Pennsylvania action had been tried on the merits, Liberty would not have prevailed on its defenses as a matter of law.

Prior to these rulings, a different trial judge found that New Jersey had personal jurisdiction over the Sereni defendants, that New Jersey law, including its statute of limitations, should be applied to assess the viability of Liberty's claims, and that Liberty could maintain a negligent misrepresentation claim against these defendants.

Liberty now appeals from the orders dismissing its case against the Richard firm and the Sereni defendants. The Sereni defendants cross-appeal from the earlier order finding them subject to New Jersey jurisdiction and applying New Jersey law to adjudicate Liberty's claims against them. We affirm. Our reasons for affirming the trial court's ruling, which dismissed Liberty's case against the Richard firm, however, differ from those expressed by the trial court. We are satisfied that the trial court erred when it reviewed de novo the propriety of the Pennsylvania court's decision to deny the Richard firm's motion to vacate the default judgment entered against Liberty. Under the doctrine of collateral estoppel, the trial court should have precluded the Richard firm from relitigating this issue. Traditional notions of comity also obligated the trial court to respect and defer to decisions made by courts of a sister state, especially when, as here, the record reflects that the foreign court afforded the parties a full and fair opportunity to litigate the matter in question.

The following facts will inform our analysis of the legal issues presented.

I. The Friedman Firm

Signora filed her class action complaint against Liberty on June 20, 1995, in the Pennsylvania Court of Common Pleas of Delaware County. Service of process was served upon Liberty and Kaplan on June 26, 1995, and June 23, 1995 respectively. Neither party filed a responsive pleading within twenty days of service of the complaint. On July 17, 1995, Signora's attorney, Mark A. Sereni, served Liberty and Kaplan with a ten-day notice of default by certified mail.

At that time, Philip Stern was Liberty's national labor and employment law counsel. On July 18, 1995, the day after he received Signora's complaint from Liberty, Stern called Sereni to request an extension of time to file an answer to the complaint. Although he was leaving on vacation soon, Stern wanted to handle this matter personally. According to Stern, Sereni agreed to extend the time to answer until August 4, 1995, provided, however, that no preliminary objections would be filed and that an entry of appearance would be filed by July 27, 2005, by a Friedman firm attorney, admitted in Pennsylvania. Stern agreed to this latter condition because he erroneously believed that his firm had such an attorney.

By letter addressed to Stern dated July 18, 1995, Sereni confirmed the terms of the oral agreement:

[Liberty and Kaplan] may have an extension of time to August 4, 1995 to file an Answer only, on the condition that I receive a time-stamped copy of your firm's Entry of Appearance for [Liberty and Kaplan] no later than July 27, 1995. If I do not receive such Entry of Appearance by that date, Signora will proceed with filing for Default Judgment.

Accordingly, I enclose the original of an unsigned Agreement Pursuant to Pa.R.C.P. Rule 237.2 to Extend Time to Plead Following Ten-Day Notice. Please date, sign and return this form along with you firm's timestamped Entry of Appearance. I will then date and sign the Agreement and send you a fully executed copy.

Fleissig, a Friedman partner, received Sereni's letter on July 24, 1995, three days after Stern had left for vacation. Unable to reach Stern, Fleissig attempted, without success, to contact Sereni by telephone to obtain his verbal approval to extend the time to comply with the terms of the agreement. Left with no other alternative, Fleissig decided to write Sereni the following letter dated July 24, 1995:

My office is in receipt of your letter requesting a "time-stamped copy of our firm's Entry of Appearance no later than July 27, 1995" agreeing to an extension of time to file an Answer. My secretary has tried several times without success to reach you or your secretary to advise you that Mr.

Stern is on vacation and will not be returning until Monday, July 31, 1995.

Please, in lieu of Mr. Stern's absence, grant the extension as discussed in his telephone ...

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